Transcript COUNTY COUNCIL SEMINAR

Pension Liaison
Officers Group
New Look LGPS
Presented by
Charlotte Thompson/Viv Ray
Shirley Cuthbert
Agenda
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LGE DVD
Employer discretions
What’s changing/what’s not/what’s gone?
Contribution bands
Certificates of protection or lack of them
Employer’s checklist
Flexi Retirement strain costs
Communication
AOB
Award of additional membership
and/or pension by Employer
• Employer has discretion to award additional membership
and/or pension to member.
• Additional membership to active member can be up to
maximum of 10 years.
• Additional pension of up to £5000.00 per annum can be
awarded on any type of retirement or later.
• Either or both awards can be made.
• Award given at discretion of Employer.
• Awaiting details of cost to the employer, Actuary may
need to do the calculations.
EMPLOYER DISCRETIONS
(A) = Administration Regulations
2007
REGS
A
1997
REGS
(B) = Benefit Regulations
DISCRETION
Discretions on which Employers must make Policies
30
B
31
Early payment of pension benefits at the request of a member
18
B
35
Flexible retirement
25(3)
A
67
The establishment of Shared Cost AVC scheme
12
B
52
Increase membership of an active member up to 10 years
13
B
Award of additional pension up to £5000 per annum
Please note cost of providing additional membership and/or pension under Regulations
12 & 13 are yet to be supplied by the Government Actuary Department.
Other employer discretions
22
A
18(6) &
(7)
A scheme member may elect to pay optional contributions to cover a
period of absence from duty providing the otpion is made within 30
days of return to work/cessation of employment or such longer
period as the employer allows.
42
B
34(1)(b)
Where a scheme member would be entitled to a pension or retirement
grant under two or more regulations by reason of the same period of
scheme membership the employer can choose which benefit is to be
paid if the member does not make a choice within 3 months of
becoming entitled to elect.
47(2)
A
88
A scheme member who meets the normal criteria for a refund of pension
contributions is not entitled to such a refund if he/she ceased
employment due to an offence of a fraudulent character or due to
grave misconduct unless the employer directs that a total or partial
refund may be made.
45
A
89
The employer may deduct the pension contributions due under the LGPS
from a person's pay.
49
A
92
Where a scheme member is paid a refund of pension contributions, the
employer must pay a Contributions Equivalent Premium (CEP). An
element of this is recovered from the refund paid to the scheme
member. The balance may be recovered from the Fund.
72
A
111
If a scheme member is convicted of, and ceases employment as a result
of, an offence in connection with his/her employment which was
gravely injurious to the State of liable to lead to a serious loss of
confidence in the public service, the employer can apply to the
Secretary of State for the issue of a forfeiture certificate. If the
Secretary of State issues a certificate the employer may direct that
any of the person's rights be forfeited.
73
A
112
Where the Secretary of State has issued a forfeiture certificate but the
employer has not applied the certificate nor notified the scheme
member of an award of benefits under the LGPS the employer may
direct that interim payments are made out of the Pension Fund until
such time as it decides to apply the forfeiture certificate or to make an
award of benefits.
74
A
113
1) Where a member ceases employment in consequence of a criminal,
negligent or fraudulent act or omission in connection with that
employment and 2) has incurred a monetary obligation arising out of
that act or omission, to the employing authority and 3) is entitled to
pension benefits under the LGPS, the employer may recover the
amount of the monetary obligation or the value of the members
pension rights, if less (other than transferred in pension rights) from
the Pension Fund and reduce the members benefits accordingly.
76
A
115
1) Where a member ceases employment in consequence of an offence
involving fraud or due to grave misconduct in connection with that
employment, and 2) the employer has suffered a direct financial loss
arising from the offence or misconduct, and 3) the member is entitled
to benefits under the LGPS and a forfeiture certificate has been
applied, or the pension member is entitled to a refund of contributions
the employer may direct that the amount of the direct financial loss (or
the refund of contributions, if less) be recovered from the Pension
Fund.
83(8)
A
121
(8)
If a scheme member wishes to transfer pension rights into the LGPS he/she
must opt to do so within 12 months of joining the LGPS or such longer
period as the employer may allow.
What’s changing?
• Eligibility
– Auto enrolment
– 3 month contract of employment with mutuality
of obligation
• Accrual rates
– Pension earned after 01/04/08 – 60ths
– No automatic lump sum
• Minimum Retirement age
– 55 for new members after April 2008
– 50 for existing members but will rise to 55 in
April 2010
What’s changing?
• Ill Health benefits
– Minimum service for enhancements now 3
months
– 3(?) tiers
– 100 % prospective service – never work again
– 25% prospective service – could work again
– Accrued benefits only – able to work again
• Death in Service lump sum
– Now 3 X salary
What’s Changing?
• Death after Retirement
– Lump sum on death before age 75 now 10
times pension less pension already paid
• Flexible Retirement
– Option to take ‘part’ of your benefits
• Additional Regular Contributions
– Buy extra pension in £250 pa. steps
– Maximum £5000
• Survivors pensions
– Now available to nominated co habiting
partners
What’s not changing?
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Definition of pensionable pay
Definition of final pensionable pay
Level of survivors long term pension
Pre 2008 pension and lump sum benefits already
accrued
Ability to take extra cash at retirement in
exchange for a smaller pension at a rate of 12:1
Normal Retirement age – still 65
Option to retire from 60
Additional voluntary Contributions
What’s gone?
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Certificates of Protection
Serious ill health commutation option
Short term survivors pension
Added years
1997 regulations (most of them!)
Contribution Bands
Band
Range (2008/09)
Contribution rate
1
2
3
4
5
6
7
£0 - £12,000
>£12,000 - £14,000
>£14,000 - £18,000
>£18,000 - £30,000
>£30,000 - £40,000
>£40,000 - £75,000
>£75,000
5.5%
5.8%
5.9%
6.5%
6.8%
7.2%
7.5%
Contribution Bands
• 5% manual workers brought into line
– 5.25% on 1 April 2008
– 5.5% on 1 April 2009
– 6.5% on 1 April 2010 (or relevant band if
lower)
– Same as everyone else 1 April 2011 onwards
• Councillors remain on 6%
Contribution Bands
• Which Band?
– Fixed annual salary - fairly straight forward
– Variable hours/bonus
• £16,000 fixed salary with variable bonus historically
of £3k. Do you put him in 5.9% band or 6.5%?
• Average contribution rate of 6.3%
• Any shortfall in employee contributions will
inevitably fall to the employer following the
next valuation.
Contribution Bands
• Reattribution of bands
– Once a year?
– Pay increases/decreases?
– Contractual change only?
• Employer must be satisfied that they can
justify their decision and have acted
reasonably
• Notify members of any changes to bands
• Any queries regarding attribution of bands
must be directed at the employer
Contribution Bands
• Rate of pay at 01/04/08 or at joining
• Full time equivalent pay
• Employee with more than one job, need to
look at each post
• Term timers – full time term time rate
• Bands will be revised each year in line with
inflation
Certificates of Protection
• Not feature of 2008 scheme
• No new certificates of protection can be
issued in respect of drops/restrictions in pay
occurring after 31 March 2008
• Existing certificates will continue to be
valid for their 10 year life span
Certificates of Protection
• Replaced
– ‘A member whose pensionable pay has been
reduced because he has chosen, within the
period of ten years ending with the last day he
was an active member, to continue in local
government employment at a lower grade, on
restricted pay or with less responsibility than
his previous post, may choose to have his final
pay calculated as the average of his annual
pensionable pay in any three consecutive years
ending 31st March within that period of 10
years’.
Certificates of Protection
• Does not cover flexible retirement events on
subsequent retirements
• Only covers drops/restrictions after 1st April
2008
• All three 31st March’s need to be within 10
years of leaving.
– Member leaves November 2020
– OK to use 1 April 2010 – 31st March 2011
Certificates of Protection
• Member’s pay drops 1st April 2010
• Member could leave as late as 31/03/2020
and qualify for the 10 year protection rule
• Which salaries can we use?
– 1st April 2010 – 31st March 2013
– All these years are after the drop in pay!
Certificates of Protection
• Member’s pay drop 1st April 2010
• To use a 3 year average of higher salary,
member needs to leave by 31 March 2017
• Average 3 years
– 1st April 2007 – 31st March 2010
April 2008 Checklist
• Casual employees
– Identify those without mutuality of obligation
– Identify those with contracts less than 3 months
– Remove them from LGPS on 31st March 2008
or first non ‘working’ day after 1st April 2008
• New employee information
– Eligible casuals auto entry
– Scheme information to other casuals - remove
• Check to see if your current scheme policies
and discretions need revisiting
April 2008 checklist
• Contribution bands
– Payroll systems amended to accommodate the
new bands including new rates for manual
workers
– Agree a policy on when to change bands
(immediately or next April)?
– Inform members of new bands
• Communicate new scheme to employees
Communication
• LGE DVD – one copy per employer
• Main changes and nomination forms out
later this month
• Employers handbook overhaul – summer 08
• Updating forms and letters to accommodate
new scheme.
• Annual benefit statements
– Postponed to summer 2008
– Review layout
– Include detail changes on the scheme
Flexible Retirement
• From age 50 (55) reduce hours or grade
with employers consent, may with the
employers consent receive his benefits. The
employer may waive in full or part any
reductions in the benefits due to early
payment.
Between age 50 - 60
• 85 year rule met Strain Cost to
employer no cost to
the employee.
(Example 1)
• EXAMPLE 1 = Age
50, Salary £25000,
DOL 31/03/08
No reduction to
member’s benefits.
Strain cost to
employer = £40277.51
Between age 50 - 60
• 85 year rule would
have been met
between date of
leaving and age 60 Strain Cost to
employer plus
actuarial cost to
member. (Example 2)
• EXAMPLE 2 = Age
50, Salary £25000,
DOL 31/03/08, 85 yr
rule would have been
met at age 57.
Member’s pension
would reduce by
32.2604% & lump
sum by 17.5069%
Strain cost to
employer would be
£4923.40 ( if employer
waives member’s
reduction strain
increases to
£48319.80)
Between age 50 - 60
• 85 year rule would
never have been
met before age 60 No Strain Cost to
employer but
actuarial cost to
member. (Example
3)
• EXAMPLE 3 = Age
53, Salary £25000,
DOL 31/03/08
Member’s pension
would reduce by
27.2959% & lump
sum by 14.1973%
( if employer waives
member’s reduction
strain increases to
£34532.91)
Age 60 +
• 85 year rule met - No
cost to employer or
employee
• 85 year rule would
never have been met
before age 65 - No
Strain Cost to
employer but actuarial
cost to member.
(Example 4)
• Example 4 = Age 60,
Salary £25000, DOL
31/03/08
Member’s pension
would reduce by
22.0138% & lump
sum by 11.2603%
( if employer waives
member’s reduction
strain increases to
£13510.86)
Caution
• AVCs- as a general rule currently cannot be
paid when a member takes flexible
retirement.
• Added Years – member has choice to
continue contract,cease contract with option
to start new one.
• Earmarking Orders – if early retirement
affects amount to be paid to ex-spouse, they
need to be informed as can take back to
court to adjust %.
Caution
• Age 50 changes to 55 – transitional regs
protect earliest retirement date as 50 until
31/03/2010. Anyone who retires after that
date or who has joined LGPS wef 01/04/08
earliest date is 55.
• Partial payment of benefits – in Regs but
currently no guidance from DCLG on how
to be calculated.
Any Questions?
Devon Pension Services
Estuary House
Peninsular Park
Rydon Lane
EXETER
www.devon.gov.uk/pensions
Email – [email protected]